Are Canadian Home Buyers’ Searches in Tune with the Market?

After analyzing over three months’ worth of listing search data, real estate portal Point2 Homes published a study revealing a wealth of information about the interests of the Canadian home buyers, with a special focus on the hotly-debated topic of home prices. According to Point2 Homes, the majority of Canadians are setting the price bar much lower than the national home price average when looking for a house.

Despite the perception that the Millennial generation doesn’t seem very interested in buying homes, the study shows that most potential homebuyers searching for real estate listings in many Canadian cities are between 25 and 34 years of age.

Millennials temper interest with financial restraint when it comes to real estate

Point2 Homes analyzed over 6 million browsing sessions on their real estate website, and concluded that in most cities and provinces, the main potential home buyers — Millennials — are generally looking for homes priced below the average.

The majority of home searches made on Point2 Homes had the price range set between $300,000 and $400,000, which is still significantly under the national average of around $450,000 (cf. CREA stats in August), not to mention the months before its drop. In certain cities, the difference between market trends and search interests is even more pronounced, as can be seen below.

Can this point to the fact that young professionals simply do not “believe the hype” of the real estate market, refusing to accept that homes are worth their current asking prices?

Expectations versus market trends: A regional conflict

Search data in cities in British Columbia and Ontario, the country’s most heated spots in terms of real estate prices, may be the most powerful to suggest that people are not easily convinced by high property prices and still believe they’re going to find something way more affordable.

July data in particular shows important differences between market reality prices and consumer expectations, while August data confirms that the gap continues to persist, despite the recent price drops, as you can see in the table below:

Vancouver, BC

The Vancouver real estate bubble has been a widely discussed topic, and the data concerning home buyer expectations can put a fresh spin on things. If July saw an average home price of $1,055,495, by August that figure had dropped to $833,065. That’s a solid 21% drop in asking price, but still, the home price searched for most frequently was as low as $750,000 – which is another 10% lower than market expectations!

Toronto, ON

Toronto real estate shows an even more obvious gap between market price and consumer expectations. The July average price was $751,908, while most searches hovered around $400,000. That makes the gap a whopping 46%. Unlike Vancouver, however, this gap did not shrink as much in August, as the average home price continued to stay above $700K ($710,410 in August).

Ottawa, ON

The capital city shows a more stable market and less of a disconnect. July figures put the average asking price at $384,212, while the most popular search price hovered around $300,000. That marks a 28% gap, which has decreased to 23% in August, as the average asking price dropped to $369,055. A possible explanation for the gap being less striking here is that the asking price in Ottawa real estate is already on the lower side of the national average.

Montreal, QC

Montreal real estate searches mostly hovered between $300,000 to $500,000, which puts them in a steady balance with the average asking price, which was $358,935.

Hamilton, ON

The average asking price of homes in Hamilton has remained virtually unchanged between July and August, hovering around $497,000. This makes the 39.7% gap between the asking price and the dominant search price of $300,000 one of the largest and most persistent in Canada.

Edmonton, AB

Real estate in Edmonton is an interesting case, different than what we saw in other cities. Here, the most sought-after search price of $400,000 is higher than the average asking price of $369,956.

The explanation might be that the demographic data shows a more balanced mix of millennials and early Gen-Xers, combined with an average asking price already well below the national average.

Calgary, AB

Alberta is one of the provinces where there hardly is a price gap between market reality and popular searches. Calgary real estate consolidates this status. While the average asking price in August was $456,663, the most popular searching price was $400,000.

Saskatoon, SK

In Saskatoon, millennials seem to be willing to spend more than the average asking price of $349,716, the most searched homes being the ones with price tags around $400,000.

The trend seems to be that Alberta, Saskatchewan and Manitoba are the three provinces where young professionals are generally willing to spend more, for larger homes.

Winnipeg, MB

Except for the Atlantic provinces, Manitoba has the lowest bar for home prices. August 2016 set the average asking price at $278,718 – just a little over half the national average. Perhaps it is unsurprising that Manitobans are then willing to spend a little more for a larger home. Winnipeg real estate data shows that most searches set a limit around $300,000.

Mississauga, ON

The truly baffling numbers are to be found in Mississauga. While the city is literally glued to Toronto from a geographic perspective, its residents seem to behave completely contrary to their counterparts.

While Toronto’s 46% is the greatest gap between consumer searches and average home prices, home buyers in Mississauga are willing to pay not only more than the local asking price – $610,081 – but more than the Toronto asking price of $710,410!

This might indicate that Mississauga is truly a millennial magnet. With the average search price at $750,000, home buyers seem to be willing to invest more in Mississauga real estate than any other group in Canada.

The Statistics Canada 2016 Census results will be published early next year. This new data should offer some more context concerning the regional markets, as it will be clearer which cities have had substantial growth and which demographics are prevalent in these population influxes. Until then, some of the observations about the real estate market remain ambiguous, with difficult to explain apparent trends (as in the case of Mississauga).

Until then, this much is clear: millennials are well on their way to being the leading demographic in home searches throughout Canada. Their unique mentality can lead to some unexpected changes in market trends, making this a very exciting time to keep an eye on Canadian real estate.

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